Fitch Affirms Northeast Utilities & Subsidiaries' IDRs at 'BBB'; Outlook Stable.

NEW YORK -- Fitch Ratings has affirmed the Issuer Default Ratings (IDRs) and debt ratings for Northeast Utilities (NU) and its subsidiaries as follows:

Northeast Utilities

--IDR at 'BBB';

--Senior unsecured debt at 'BBB'.

The Connecticut Light & Power Company (CL&P)

--IDR at 'BBB';

--First and refunding mortgage debt at 'A-';

--Senior unsecured and second-mortgage pollution control bonds at 'BBB+';

--Preferred stock at 'BBB'.

Public Service Co. of New Hampshire (PSNH)

--IDR at 'BBB';

--Senior secured debt at 'BBB+'.

Western Massachusetts Electric Company (WMECO)

--IDR at 'BBB';

--Senior unsecured bonds at 'BBB+'.

The Rating Outlook for all entities remains Stable.

NU's ratings and Outlook reflect the relatively stable cash flows of its regulated utility subsidiaries, low commodity price risk, adequate liquidity, constructive regulation in its multi-jurisdictional service territory, and management's relatively low-risk business strategy of growing transmission and distribution (T&D) infrastructure through important reliability projects. Neither CL&P nor WMECO bear any commodity price risk. Supply obligations are secured through full requirements contracts with third party suppliers, and the costs are passed through to rate payers. PSNH, which still owns approximately 1,150 MW of generation, recovers purchased power and fuel costs through its energy service and stranded cost recovery charges. The ratings of NU and its subsidiaries also consider the sizeable capital expenditure plan.

Capital expenditures at NU's regulated utilities for upgrading and expanding T&D systems are expected to total more than $6.5 billion from 2009 through 2013 of which an estimated $2.5 billion (or 38%) is at CL&P, $2.6 billion is at PSNH (40%), $1 billion is at WMECO (15.5%) and $500 million is at Yankee Gas (7.6%). The high rate of new investment in electric transmission facilities entails some execution risk and external funding needs, but over the longer-term it will result in a higher proportion of operating cash flows from FERC jurisdiction, which generally allows higher investment returns and is considered by Fitch to be very constructive.

NU anticipates funding its system expansion primarily through a mix of internally generated cash, future debt issuances, and common equity. Financing these expenditures with an adequate mix of equity and debt consistent with its current credit profile remains a key to maintain existing ratings.

On a consolidated basis, NU recorded sound financial performance for the LTM ending June 30, 2009, as the T&D businesses benefited from rate settlements in support of increased utility investments and the divestiture of its more volatile competitive operations. The scheduled T&D investments are projected to grow rate base from $6.5 billion in 2008 to about $9.5 billion year-end (YE) 2013, an increase of about 46%. Transmission investments, which total just over $3.4 billion over the next five years, are expected to increase transmission earnings from 36% of consolidated earnings to approximately 53% over the same time period. Importantly, there are mechanisms in place that allow for timely recovery of the company's Federal Energy Regulatory Commission (FERC) regulated transmission investments. Over 90% of NU's planned transmission expenditures are expected to be included in the regional planning process and as such earn higher returns, which currently are 11.64% return on equity (ROE) plus project-specific incentive adders as approved by FERC and generally allow for a portions of construction work in progress (CWIP) into rate base.

NU and its subsidiaries are projected to issue $2.5 billion of consolidated debt through 2013 to fund the capital expenditure program. Total adjusted debt to FFO is expected range between 6.4-7.1 times (x) while interest coverage as measured by the ratio of FFO to interest is expected fall in the 3.6x-4.1x range.

CL&P's ratings and Outlook reflect the stable cash flows from its regulated T&D business and adjustment mechanisms that allow for recovery of the company's substantial transmission investments and full recovery of energy, congestion and transmission costs. Cash flow coverage metrics remain supportive of its current rating category and are expected to reflect continued improvement as the company increases investments in and realizes higher earnings on transmission investments.

The ratings of PSNH and WMECO reflect their predictable cash flows and relatively low commodity price risk as described above. Debt leverage at both utilities is expected to increase over the next several years as they implement their respective T&D investment related spending plans. While transmission related investments are subject to favorable FERC recovery mechanisms, both utilities are expected to require on going rate support from state regulators over the next several years to recover distribution investments.

Inadequate equity funding of the capital build-out or delays in the regulatory recovery of these investments could lead to negative rating action. This is particularly applicable to WMECO, which due to the upcoming New England East-West Solution (NEEWS) family of transmission projects is projected to more than triple its debt. The company has been authorized a 12.89% ROE as well as 100% CWIP in rate base on this project, which should help mitigate cash flow pressure related to the additional debt funding.

Through its regulated subsidiaries, CL&P, PSNH, WMECO and Yankee Gas Services, NU provides power and gas to a total of 2.1 million residential, commercial and industrial customers in New England. In 2006, NU divested a majority of its unregulated businesses.

Additional information is available at 'www.fitchratings.com'.

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